Who Should Take Education Tax Breaks: Parents or Students?

When it comes to education tax breaks, it’s important to carefully consider your options, and plan out who is going to take what tax break. This is an important distinction because it’s an either/or situation in terms of who gets the tax break. If the parent claims the education tax deduction or credit, then the child (in this case, the dependent) can’t claim it. If the child claims it for himself or herself, then the parent can’t claim it. Parents have to communicate with their kids since the education tax breaks are only allowed to be claimed on either one of your tax returns and not both.

Who Should Take Education Tax Benefits

Who Should Take Education Tax Benefits

Is the Student a Dependent?

First of all, you need to determine if the student is a dependent. If a parent claims his or her student as a dependent, then that’s who gets to take the tax credit or education deduction. Whether it’s the American Opportunity Tax Credit, Lifetime Learning Credit, or the Tuition and Fees Deduction, only one person gets the tax advantage and it often comes down to whether the student is a dependent in the eyes of the IRS. If a student is a dependent on someone else’s tax return, the student doesn’t qualify for these tax breaks.

If a student isn’t claimed as a dependent, though, it’s possible for him or her to claim an education tax credit, or take the deduction.  One thing to keep in mind, each student cannot claim more than one tax break. So it’s one of the education credits or education deduction (not all of them).

Should the Student Take the Tax Credit or Deduction?

In some cases, it makes sense for the student to take the tax break. If the student is married, and no longer dependent on a parent for support, obviously that’s who should take the education tax break. Additionally, if the student makes enough money to owe taxes, it makes sense to reduce that tax bill as much as possible.

Most of the time, though, students don’t earn enough money to owe taxes. As a result, in many cases, it makes more sense for parents to claim their children as dependents and reap the benefits of the tax breaks. After all, parents have spent quite a lot to raise their children, and probably help pay for college. It’s only reasonable that they receive some sort of financial benefit in return – and a lower tax bill is one way to recoup a few of those costs.

Once you have made your decision about who will claim the education tax benefit, TurboTax will figure out which education tax credit or deduction you are eligible for when you prepare your taxes.

Comments (4) Leave your comment

  1. TurboTax will not allow the tuition credit on my dependent’s return because: “Your parents can claim you on their return.” Even if the parent (me) chooses not to take the dependency exemption, TurboTax will not allow the student (my son) to take the tuition credit on his return. So, even if my dependent and I both want to give up the dependent exemption, TurboTax still will not allow my son to take the tuition deduction.
    Is that contrary to the Reg cited above?

  2. I think this is all wrong. You can’t choose who gets to take the credit. The student cannot claim themselves as a dependent unless their parents cannot claim them. The parent cannot forego the exemption in hopes that the student will get the education credit. The title of the article suggests that it’s a choice; it isn’t.

    From IRS literature: If you are entitled to claim an exemption for a dependent, that dependent cannot claim a personal exemption on his or her own tax return.

    • You are confusing two different issues. You’re correct that the dependent can’t claim a personal exemption if eligible to be claimed by their parents. However, if the parents choose not to claim the child as a dependent the child can take the education credits. In that case neither the parents or the child claim a dependency exemption for the child. This clearly spelled out in Reg Reg § 1.25A-1(f)(2), Ex 2.

  3. form 8863 says if you are under 24 years old you cannot claim the refundable part of the credit.
    Shouldn’t it
    read that if you are over 24 you cannot claim the refundable part?

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